* Share amounts have been
adjusted to reflect a one for 200 reverse split which become effective in January 2016.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
Description of Business and Organization
References
herein to “Kiwa” or the “Company” refer to Kiwa Bio-Tech Products Group Corporation and its wholly-owned
subsidiaries unless the context specifically states or implies otherwise.
Business
–The Company’s business is to develop, manufacture, distribute and market innovative, cost-effective and environmentally
safe bio-technological products for agriculture markets located primarily in China. The Company has acquired technologies to produce
and market bio-fertilizer.
Acquisition
of Caber Holdings Ltd
- On November 30, 2015, we entered into an acquisition agreement (the “Agreement”) with
the shareholders of Caber Holdings LTD, whose Chinese name is Hong Kong Baina Group Co., Ltd, located in Hong Kong (“Baina
Hong Kong”), and Oriental Baina Co. Ltd. (hereinafter referred to as “Baina Beijing”), Baina Hong Kong’s
wholly-owned subsidiary in Beijing, China. Kiwa will rename Baina Beijing to Kiwa Baiao Co. Ltd. Kiwa Baiao Co. Ltd will replace
Kiwa’s current subsidiary in China - Kiwa Bio-Tech (Shandong) Co., Ltd (“Kiwa Shandong”) - to operate Kiwa’s
bio-fertilizer market expansion and become Kiwa’s platform for future acquisitions of new agricultural-related projects
in China. In accordance with the terms of the Agreement, Kiwa agreed to pay US$30,000 to the Baina Hong Kong Shareholders for
the acquisition of 100% of the equity of Baina Hong Kong. The acquisition was completed on January 7, 2016. Both Baina Hong Kong
and Baina Beijing had no activities before the acquisition date and had no assets and liabilities. The total payment of approximately
$34,000 was recorded as goodwill.
2.
Going Concern
The
consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets
and liabilities presented in the consolidated financial statements do not purport to represent the realizable or settlement values.
As
of June 30, 2016, the Company had cash of $12,367. The Company had working capital deficit of $5,831,748 and an accumulated deficit
of $ 20,086,706 as of June 30, 2016. This trend is expected to continue. These factors, among others, create substantial doubt
about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
During
2016, the Company plans to (1) raise finance from related-parties, local banks, other financial institutions and other stock market
to meet cash demand of daily demand; and (2) raise capital to resume operations. However, there can be no assurance that we will
be successful in obtaining this financing (3) The Company’s business plan is to develop, manufacture, distribute and market
innovative, cost-effective and environmentally safe biotechnological products for agriculture markets located primarily in China.
The Company has acquired technologies to produce and market bio-fertilizer.
3.
Summaries of Significant Accounting Policies
Principle
of consolidation
- These consolidated financial statements include the financial statements of the Company and its wholly-owned
subsidiaries. All significant inter-company balances or transactions are eliminated on consolidation.
Basis
of preparation
- These interim consolidated financial statements are unaudited. In the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) and disclosures necessary for a fair presentation of these interim condensed
consolidated financial statements have been included. The results reported in the consolidated financial statements for any interim
periods are not necessarily indicative of the results that may be reported for the entire year or any other periods. The (a) consolidated
balance sheet as of December 31, 2015, which was derived from audited financial statements, and (b) the unaudited interim consolidated
financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations, although the Company
believes that the disclosures made are adequate to make the information not misleading. These unaudited consolidated financial
statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
KIWA
BIO-TECH PRODUCTS GROUP CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Reverse
Split
- On January 14, 2016, the Company filed a Certificate of Amendment of its Certificate of Incorporation with the State
of Delaware with reference to a 1-for-200 reverse stock split with respect to its Common Stock with effective date of January
28, 2016. In connection with the reverse split, the Company’s authorized capital stock was amended to be 120,000,000 shares,
comprising 100,000,000 shares of Common Stock par value $0.001 and 20,000,000 shares of Preferred Stock par value $0.001. All
relevant information relating to numbers of shares, options and per share information have been retrospectively adjusted to reflect
the reverse stock split for all periods presented.
Use
of Estimates
- The preparation of financial statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the
date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant accounting estimates include the bad debt provision, impairment
of inventory and long-lived assets, depreciation and amortization, valuation allowance of deferred tax assets and fair value of
warrants and options.
Foreign
Currency Translation
- The Company uses United States dollars (“US Dollar” or “US$” or “$”)
for financial reporting purposes. However, the Company maintains the books and records in its functional currency, Chinese Renminbi
(“RMB”), being the primary currency of the economic environment in which its operations are conducted. In general,
the Company translates its assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance
sheet date, and the statement of income is translated at average exchange rates during the reporting period. Equity accounts are
translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements are recorded
as accumulated other comprehensive income.
The
exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the condensed consolidated financial
statements were as follows:
|
|
|
As
of June 30, 2016
|
|
|
|
As
of December 31, 2015
|
|
Balance
sheet items, except for equity accounts
|
|
|
US$1
= RMB 6.6443
|
|
|
|
US$1
= RMB 6.4857
|
|
|
|
|
Six
months ended June 30,
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Items
in the statements of income and cash flows
|
|
|
US$1
= RMB 6.5345
|
|
|
|
US$1
= RMB 6.1254
|
|
Impairment
of Long-Lived Assets
- We periodically evaluate our investment in long-lived assets, including property and equipment, for
recoverability whenever events or changes in circumstances indicate the net carrying amount may not be recoverable. Our judgments
regarding potential impairment are based on legal factors, market conditions and operational performance indicators, among others.
In assessing the impairment of property and equipment, we make assumptions regarding the estimated future cash flows and other
factors to determine the fair value of the respective assets. Based on our analysis, no further impairment on long-lived assets
was charged during the six months ended June 30, 2016.
Revenue
Recognition
- The Company recognizes revenue in accordance with FASB ASC Topic 605, “Revenue Recognition.”. Revenue
represents fees per licensing agreement. The Company entered into an agreement with a company, Kangtan Gerui (Beijing) Bio-Tech
Co., Ltd. (“Gerui”), to allow Gerui sell products with the Company’s trademark. Gerui will pay 10% of total
sales amount to the Company as license fee. The Company recognized license fees when a formal arrangement exists, the price is
fixed or determinable, the delivery is completed, and no other significant obligations of the Company exist and collectability
is reasonably assured by Gerui. Payments received before all of the relevant criteria for revenue recognition are satisfied are
recorded as advances from customers.
Accounts
Receivables
- Accounts receivables represent customer accounts receivables. The allowance for doubtful accounts is based on
a combination of current sales, historical charge offs and specific accounts identified as high risk. Uncollectible accounts receivable
are charged against the allowance for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted.
Such allowances, if any, would be recorded in the period the impairment is identified.
KIWA
BIO-TECH PRODUCTS GROUP CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Income
Taxes
- The Company accounts for income taxes under the provisions of FASB ASC Topic 740, “Income Tax,” which
requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are recognized for the future
tax consequence attributable to the difference between the tax bases of assets and liabilities and their reported amounts in the
financial statements. Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company establishes
a valuation when it is more likely than not that the assets will not be recovered.
Fair
value measurements
- ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes
a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There
are three levels of inputs that may be used to measure fair value:
Level
1 - Quoted prices in active markets for identical assets or liabilities.
Level
2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level
3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities.
The
carrying values of cash and cash equivalents, trade receivables and payables, and short-term debts approximate their fair values
due to their short maturities.
There
were no assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2016 and December 31, 2015.
4.
Deposits and other receivables
Deposit
and other receivables consist of following:
|
|
As of
|
|
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
Advance to customer – Gerui
|
|
$
|
1,152,863
|
|
|
$
|
-
|
|
Deposits for acquisition
|
|
|
-
|
|
|
|
33,921
|
|
Advance to employees
|
|
|
13,957
|
|
|
|
13,532
|
|
Rent and utility deposits
|
|
|
35,383
|
|
|
|
-
|
|
Others
|
|
|
1,361
|
|
|
|
-
|
|
|
|
$
|
1,203,564
|
|
|
$
|
47,453
|
|
KIWA
BIO-TECH PRODUCTS GROUP CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5.
Related Party Transactions and Balances
Amounts
due to related parties consisted of the following:
Item
|
|
Nature
|
|
|
Notes
|
|
|
June
30, 2016
|
|
|
December
31, 2015
|
|
Mr. Wei Li (“Mr. Li”)
|
|
|
Non-trade
|
|
|
|
(1)
|
|
|
$
|
-
|
|
|
$
|
2,879,307
|
|
Kangtai Xinnong Agriculture Tech (Beijing) Co.,
Ltd. (“Kangtai”)
|
|
|
Non-trade
|
|
|
|
(2)
|
|
|
|
-
|
|
|
|
(12,173
|
)
|
Ms. Yvonne Wang
(“Ms. Wang”)
|
|
|
Non-trade
|
|
|
|
(3)
|
|
|
|
96,710
|
|
|
|
299,064
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
96,710
|
|
|
|
3,166,198
|
|
Kiwa-CAU R&D Center
|
|
|
Trade
|
|
|
|
(4)
|
|
|
|
1,173,933
|
|
|
|
1,125,553
|
|
CAAS IARRP and
IAED Institutes
|
|
|
Trade
|
|
|
|
(5)
|
|
|
|
93,678
|
|
|
|
18,425
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
1,267,611
|
|
|
|
1,143,978
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,364,321
|
|
|
$
|
4,310,176
|
|
(1) Mr.
Li
Mr.
Li was the Chairman of the Board until November 20, 2015 and was the Chief Executive Officer of the Company until July 1, 2015.
Advances
and Loans
As
of December 31, 2015, the remaining balance due Mr. Li was $2,879,307. During the six months ended June 30, 2016, Mr. Li received
2,900,000 shares of common stock in lieu of the cancellation and repayment of an aggregate of $2,879,307 and salary payable.
Guarantees
for the Company
Mr.
Li has pledged without any compensation from the Company, all of his common stock of the Company as collateral security for the
Company’s obligations under the 6% Notes. (See Note 7 below).
(2) Kangtai
Kangtai,
formerly named Kangtai International Logistics (Beijing) Co., Ltd., Kangtai Xinnong Agriculture Tech (Beijing) Co., Ltd., is a
private company, 28% owned by Mr. Li. Mr. Li is the Chairman of Kangtai.
On
December 31, 2015, the amount due from Kangtai was $12,173. The balance due from Kangtai on June 30, 2016 was nil.
(3) Ms.
Wang
Ms.
Wang is the Secretary of the Company until November 20, 2015. Effective as of November 20, 2015, the Company appointed Ms. Wang
as the Chairman of the Board. Effective as of December 15, 2015, the Company appointed Ms. Wang as the Company’s Chief Operating
Officer.
On
December 31, 2015, the amount due to Ms. Wang was $299,064.
On March 24, 2016, the Company
issued 240,000 shares of common stock to Ms. Wang to pay off the loan balance of $240,000.
During the six months ended
June 30, 2016, Ms. Wang paid various expenses on behalf of the Company. As of June 30, 2016, the amount due to Ms. Wang was $96,710.
KIWA
BIO-TECH PRODUCTS GROUP CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(4)
Kiwa-CAU R&D Center
Pursuant
to the agreement with China Agricultural University (“CAU”), the Company agree to invest RMB 1 million (approximately
$160,000) each year to fund research at Kiwa-CAU R&D Center. Prof. Qi Wang, one of the Company’s directors, is also
the director of Kiwa-CAU R&D Center.
On
December 31, 2015, the amount due to Kiwa-CAU R&D Center was $1,125,553. As of June 30, 2016, the outstanding balance due
to Kiwa-CAU R&D Center was $1,173,933.
(5)
CAAS IARRP and IAED Institutes
On
November 5, 2015, the Company signed a strategic cooperation agreement (the “Agreement”) with China Academy of Agricultural
Science (“CAAS”)’s Institute of Agricultural Resources & Regional Planning (“IARRP”) and Institute
of Agricultural Economy & Development (“IAED”). Pursuant to the Agreement, the Company will form a strategic partnership
with the two institutes and establish an “International Cooperation Platform for Internet and Safe Agricultural Products”.
To fund the cooperation platform’s R&D activities, the Company will provide RMB 1 million (approximately $160,000) per
year to the Spatial Agriculture Planning Method & Applications Innovation Team that belongs to the Institutes. The term of
the Agreement is for three years beginning November 20, 2015. Prof. Yong Chang Wu, the authorized representative of IARRP, CAAS,
is also one of the Company’s directors effective since November 20, 2015.
On
December 31, 2015, the amount due to Kiwa- CAAS IARRP and IAED Institutes R&D Center was $18,425. As of June 30, 2016, the
outstanding balance due to Kiwa-CAAS IARRP and IAED Institutes R&D center was $93,678.
6.
Other Payable
Other
payable includes the payables to two potential investors and other liabilities. As of June 30, 2016, two potential investors made
the first payments of $481,614 to the Company and the investment agreements haven’t been reached yet. Those two potential
investors are non-related parties.
7.
Convertible Notes Payable
Convertible
notes payable consists of 6% secured convertible notes issued to FirsTrust Group Inc. on June 29, 2006. The notes beard interest
at 6% and were due on June 29, 2009. Once the note is pass due, the interest rate increased to 15% per annum. The Company accrued
$11,451 and $11,176 interest expense on convertible notes for the six months ended June 30, 2016 and 2015, respectively.
The
conversion price of the 6% Notes is based on a 40% discount to the average of the trading price of the Company’s common
stock on the OTC Bulletin Board over a 20-day trading period. The conversion price is also adjusted for certain subsequent issuances
of equity securities of the Company at prices below the conversion price then in effect. The 6% Notes contain a volume limitation
that prohibits the holder from further converting the 6% Notes if doing so would cause the holder and its affiliates to hold more
than 4.99% of the Company’s outstanding common stock. In addition, the holder of the 6% Notes agrees that they may not convert
more than their pro-rata share (based on original principal amount) of the greater of $120,000 principal amount of the 6% Notes
per calendar month or the average daily dollar volume calculated during the 10 business days prior to a conversion, per conversion.
This conversion limit has since been eliminated pursuant to an agreement by the Company and the Purchasers.
The
Company incurs a financial penalty in cash or shares at the option of the Company (equal to 2% of the outstanding amount of the
Notes per month plus accrued and unpaid interest on the Notes, prorated for partial months) if it breaches this or other affirmative
covenants in the Purchase Agreement, including a covenant to maintain a sufficient number of authorized shares under its Certificate
of Incorporation to cover at least 110% of the stock issuable upon full conversion of the Notes. Pursuant to the relevant provisions
for liquidated damages in the Purchase Agreement, the Company has accrued the penalty of $38,108 and $35,397 for the six months
ended June 30, 2016 and 2015, respectively.
The
6% Notes require the Company to procure the Purchaser’s consent prior to taking certain actions including the payment of
dividends, repurchasing stock, incurring debt, guaranteeing obligations, merging or restructuring the Company, or selling significant
assets.
KIWA
BIO-TECH PRODUCTS GROUP CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
Company’s obligations under the 6% Notes are secured by a first priority security interest in the Company’s intellectual
property pursuant to an Intellectual Property Security Agreement with the Purchasers, and by a first priority security interest
in all of the Company’s other assets pursuant to a Security Agreement with the Purchasers. In addition, Mr. Li, the Company’s
Chief Executive Officer until July 1, 2015, has pledged all of his common stock of the Company as collateral for the Company’s
obligations under the 6% Notes. The intellectual property pledged had a cost of $592,901 which carrying value of $179,897 was
fully impaired during the year ended December 31, 2009.
8.
Note payable
On
May 29, 2007, the Company issued a $360,000 promissory note to an unrelated individual. This note bears interest at 18% per annum
and due on July 27, 2007. This note is currently in default and bears interest of 25% per annum (the “Default rate”)
until paid in full. This note is secured by a pledge of 6,178,336 (post-reverse split 30,892) shares of the Company’s common
stock owned by Investlink (China) Limited, a British Virgin Island corporation. The Company accrued $45,000 and $45,000 interest
expense on note payable for the six months ended June 30, 2016 and 2015, respectively.
9.
Stockholders’ Equity
During
the six month ended June 30, 2016, the Company issued 3,140,000 shares of common stock to Mr. Li and Ms. Wang for debt repayment
and salary payment for an aggregate amount of $3,141,000. (See Note 5)
Meanwhile,
the Company issued 220,000 shares of common stock to three individual shareholders in the second quarter of 2016 for an aggregate
amount of $176,000.
10.
Stock-based Compensation
On
December 12, 2006, the Company granted options for 2,000,000 shares of its common stock under its 2004 Stock Incentive Plan. Summary
of options issued and outstanding at June 30, 2016 and the movements during the six months then ended are as follows:
|
|
Number
of
underlying
shares
|
|
|
Weighted-
Average
Exercise
Price
Per Share
|
|
|
Aggregate
Intrinsic
Value (1)
|
|
|
Weighted-
Average
Contractual Life
Remaining in Years
|
|
Outstanding at December 31,
2015
|
|
|
6,163
|
|
|
$
|
35
|
|
|
$
|
-
|
|
|
|
1
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Outstanding at
June 30, 2016
|
|
|
6,163
|
|
|
$
|
35
|
|
|
$
|
-
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at
June 30, 2016
|
|
|
6,163
|
|
|
$
|
35
|
|
|
$
|
-
|
|
|
|
0.5
|
|
(1)
|
The market value
of the Company’s common stock at June 30, 2016 was $1.65 per share. The outstanding options had no intrinsic value at
June 30, 2016.
|
KIWA
BIO-TECH PRODUCTS GROUP CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11.
Commitments and Contingencies
The
Company has the following material contractual obligations:
Operation
of Kiwa-CAU R&D Center
Pursuant
to the agreement on joint incorporation of the research and development center between CAU and Kiwa Shandong dated November 14,
2006, Kiwa Shandong agrees to invest RMB1 million (approximately $160,000) each year to fund research at the R&D Center. The
term of this Agreement is ten years starting from July 1, 2006. Qi Wang, one of our directors commencing in July 2007 has acted
as Director of Kiwa-CAU R&D Center since July 2006.
CAAS
IARRP and IAED Institutes
On
November 5, 2015, the Company signed a strategic cooperation agreement (the “Agreement”) with China Academy of Agricultural
Science (“CAAS”)’s Institute of Agricultural Resources & Regional Planning (“IARRP”) and Institute
of Agricultural Economy & Development (“IAED”). Pursuant to the Agreement, the Company will form a strategic partnership
with the two institutes and establish an “International Cooperation Platform for Internet and Safe Agricultural Products”.
To fund the cooperation platform’s R&D activities, the Company will provide RMB 1 Million (approximately $160,000) per
year to the Spatial Agriculture Planning Method & Applications Innovation Team that belongs to the Institutes. The term of
the Agreement is for three years beginning November 20, 2015. Prof Yong Chang Wu, the authorized representative of IARRP, CAAS,
is also one of the Company’s directors effective since November 20, 2015.
Investment
in manufacturing and research facilities in Zoucheng, Shandong Province in China
According
to the Project Agreement with Zoucheng Municipal Government in 2002, the Company has committed to investing approximately $18
million to $24 million for developing the manufacturing and research facilities in Zoucheng, Shandong Province. The Company had
invested approximately $2 million for the project during the period from 2004 to 2010 and no additional investments were made
since then.
12.
Income Tax
In
accordance with the current tax laws in China, the company’s subsidiaries in china are subject to a corporate income tax
rate of 25% on its taxable income. However, no income tax provision has been provided since the Chinese subsidiaries had no taxable
income for the six months ended June 30, 2016 and 2015.
No
provision for U.S. income taxes is made as the Company has no taxable income in the U.S. In accordance with the relevant tax laws
in the British Virgin Islands, Kiwa BVI, as an International Business Company, is exempt from income taxes.
KIWA
BIO-TECH PRODUCTS GROUP CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A
reconciliation of the provision for income taxes determined at the local income tax rate to the Company’s effective income
tax rate is as follows:
|
|
Six months ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Pre-tax income (loss)
|
|
$
|
238,105
|
|
|
$
|
(320,826
|
)
|
|
|
|
|
|
|
|
|
|
U.S. federal corporate income tax rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Income tax computed at U.S. federal corporate income tax rate
|
|
|
80,956
|
|
|
|
(109,081
|
)
|
Reconciling items:
|
|
|
|
|
|
|
|
|
Rate differential for PRC earnings
|
|
|
13,668
|
|
|
|
12,386
|
|
Change of valuation allowance
|
|
|
146,608
|
|
|
|
76,295
|
|
Non-deductible expenses (Non-taxable income)
|
|
|
(241,232
|
)
|
|
|
20,400
|
|
Effective tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company had deferred tax assets as follows:
|
|
June
30, 2016
|
|
|
December
31, 2015
|
|
Net
operating losses carried forward
|
|
$
|
3,473,331
|
|
|
$
|
3,398,402
|
|
Less:
Valuation allowance
|
|
|
(3,473,331
|
)
|
|
|
(3,398,402
|
)
|
Net deferred tax
assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
net operating losses carried forward were approximately $8.6 million at June 30, 2016, which will expire between 2016 and 2026.
Full valuation allowance has been made because it is considered more likely than not that the deferred tax assets will not be
realized through sufficient future earnings of the entity to which the operating losses relate.
13.
Subsequent events
On
July 20, 2016, the Company entered into Common Stock Purchase Agreement with three unrelated individuals. Pursuant to the Agreement,
the Company will issue total 60,000 shares of restricted common stock at $0.80 per share for an aggregate amount of $48,000.